Runlayer showed Rippling its source code. A Rippling insider called the result ‘a 1 to 1 copy.’

Runlayer, a New York AI-security startup backed by Khosla Ventures, sued Rippling on Tuesday in Manhattan federal court, alleging trade-secret theft, unfair competition, and breach of contract after Rippling spent nearly a year reviewing Runlayer's source code and then built what a Rippling insider called 'a 1 to 1 copy' of its MCP gateway product. Rippling, the workforce-software firm valued at $16.8bn, confirmed it is launching its own MCP gateway but denied taking any proprietary information, calling Runlayer's claims a 'panicked effort to avoid competition.'

Runlayer spent nearly a year showing Rippling how its product worked, down to the source code. It now says Rippling used that access to build a near-copy. The New York AI-security startup sued Rippling on Tuesday in a Manhattan federal court, the New York Post first reported https://nypost.com/2026/07/28/business/nyc-ai-startup-backed-by-tech-billionaire-khosla-sues-rippling-over-trade-secret-theft/ . The complaint alleges trade-secret theft, unfair competition and breach of contract. Runlayer makes a secure gateway for the Model Context Protocol https://thenextweb.com/news/rise-of-model-context-protocol-in-the-agentic-era . That is the standard that lets AI agents reach into a company’s data and tools. Rippling, the workforce-software firm valued at $16.8bn, had spent months as a prospective customer. The dispute lands amid a wave of AI trade-secret fights, from Apple’s suit against OpenAI https://thenextweb.com/news/apple-sues-openai-trade-secrets-theft-hardware to the OpenAI and xAI https://thenextweb.com/news/openai-xai-legal-fees-apple-trade-secrets battle. The tip-off The two signed a mutual non-disclosure agreement, plus a trial contract barring Rippling from copying the product or building derivatives. Those are standard terms in enterprise software. Over nearly a year of close collaboration, Runlayer handed Rippling its roadmap, source code and gateway architecture. Talks then broke down over price, and Runlayer cut off access on 12 June. That same day, the suit says, a Rippling insider texted Runlayer’s chief executive Andrew Berman with a warning. “There’s been a project internally to build essentially a clone” of Runlayer, the message read, “almost a 1 to 1 copy.”The insider added that it “smells like a Parker thing,” a reference to Rippling’s chief executive Parker Conrad. By 1 July, Runlayer says, it had a screenshot of Rippling’s competing gateway. It had also spotted Rippling job ads matching the secrets it had disclosed. What Rippling says Rippling confirmed it is launching its own MCP gateway, but flatly denied taking anything. “Runlayer’s panicked effort to avoid competition by fabricating claims is not an effective way to deal with its business failures,” a spokesperson told TechCrunch https://techcrunch.com/2026/07/28/mcp-startup-runlayer-accuses-rippling-of-stealing-its-product-idea/ . The company said it was building “a superior product… using only our proprietary information,” and had “every reason to win in this market.” Runlayer says it will “vigorously defend” its work, according to its statement https://www.prnewswire.com/news-releases/runlayer-files-suit-against-rippling-alleging-trade-secrets-misappropriation-in-sdny-over-ai-product-clone-seeks-preliminary-injunction-302836968.html . It is represented by Sullivan & Cromwell and is seeking an injunction to block the rival product. The trap for AI infrastructure Whatever a court makes of it, the case is a warning for startups selling AI plumbing to big customers. Enterprise deals hinge on long, hands-on trials, and a trial is exactly when a buyer sees everything. Runlayer is barely a year old, has around five staff, and $42m from Khosla Ventures https://thenextweb.com/news/khosla-ventures-first-backer-of-openai-is-raising-up-to-5-5bn and Felicis. Rippling has the engineering muscle to build in-house, and the MCP gateway market https://thenextweb.com/news/upwind-ai-sensor-endpoints-mcp-cloud-security is already crowded. The irony is sharp, too. Rippling spent last year as the victim of a corporate-espionage scandal, when a rival planted a spy inside it. Now it is the one accused of taking what it saw. Get the TNW newsletter Get the most important tech news in your inbox each week.